As more states move to legalize pot, Humboldt County, California, an epicenter of the underground marijuana industry, has begun a new, bold experiment to bring growers out of the shadows and regulate the growth, sale and environmental impact of cannabis. Special correspondent Sheraz Sadiq of KQED reports.

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HARI SREENIVASAN:

In November, four more states voted to legalize recreational marijuana, bringing the total number to seven.

With more states loosening restrictions, cities and counties are seeking ways to regulate cannabis farming, including a county in California piloting a project to keep pot off the black market.

SHERAZ SADIQ:

Nearly 300 miles north of San Francisco, thick redwoods reach to the sky. In this land of giants, the buzz of sawmills and the splash of fishing nets once signaled a booming economy.

Today, there's another industry in Humboldt County that is thriving and driving up demand for goods and services.

MAN:

And your total will be $3,023.99 after tax.

SHERAZ SADIQ:

From leaf trimming machines to water storage services and specialty soils, marijuana, or cannabis, as it's also known, is big business in Humboldt County.

PATRICK MURPHY, Emerald Family Farms:

Humboldt County is the Napa of cannabis. It is by far and away the largest production zone of high-quality cannabis in the world.

SHERAZ SADIQ:

And for the first time in nearly 50 years, it's coming out of the shadows through a bold new experiment that allows people to legally grow medical cannabis for profit.

PATRICK MURPHY:

I believe that, instead of complaining about the smell of cannabis, the people of Humboldt County will realize that that's the smell of cultivating local prosperity.

SHERAZ SADIQ:

Patrick Murphy is the co-owner of Emerald Family Farms, a collective of cannabis farmers.

PATRICK MURPHY:

We would like to create an industry that is both environmentally and economically sustainable.

The first time I cultivated cannabis was when I was 16 years old. And I have been cultivating cannabis ever since.

SHERAZ SADIQ:

Farmers like Murphy are now required to register with the county so they can get permits to legally grow medical cannabis, just as they would for other agricultural crops.

Size limits apply, depending on how the crop is grown, and whether it's new or existing cultivation.

STEVE LAZAR, Planning and Building Dept, Humboldt County: The limit for new cultivation is 10,000 square feet, or about a quarter of an acre. Existing operations, we have allowed all the way up to one acre in size, if they can meet requirements.

SHERAZ SADIQ:

Steve Lazar is a senior planner at the Planning and Building Department in Eureka. He helped write the county's new rules as a green rush has been taking off in the forested hills of Humboldt.

STEVE LAZAR:

So, here, we're looking at a photograph from 2006. The photograph shows a forested area. But, by 2015, this area is now host to 20 to 30 different cultivation operations. So, here we can see every of greenhouse construction, water storage. One could easily estimate that there's over 10,000 cultivation sites in the county at this point.

SHERAZ SADIQ:

People from all over the world are rushing to Humboldt to cultivate cannabis. But the lure of pot profits is straining local watersheds and threatening endangered salmon.

SCOTT BAUER, California Department of Fish and Wildlife: Marijuana cultivation is probably the biggest issue facing the recovery of our salmon and steelhead.

We put a million dollars into a watershed to restore fish there. And I go out on a site and I see a million dollars in habitat damage.

SHERAZ SADIQ:

Scott Bauer is a scientist with the California Department of Fish and Wildlife.

SCOTT BAUER:

Typically, on an enforcement activity, we see illegal road-grading, bulldozers pushing dirt into streams. We see people diverting water, and, in fact, taking most of the water out of the stream to cultivate marijuana.

SHERAZ SADIQ:

Bauer and his team not only fine growers for breaking environmental laws. They also give permits to legally take water from rivers and streams.

SCOTT BAUER:

We would like every marijuana cultivator to get a permit from the department to divert water. We condition our permit to say, you can't have any water in the summertime. You need to take water in the wintertime, and store it for use later.

SHERAZ SADIQ:

Cannabis has been legal to use in California for medical purposes since 1996.

WOMAN:

It's got a great look, got a great smell.

SHERAZ SADIQ:

Patients could also grow cannabis and supply it to dispensaries as long as they didn't profit from it.

But all that will change in 2018. That's when California will begin issuing licenses for commercial medical cannabis activities. Until then, counties and cities are trying to regulate the cannabis industry at the local level.

STEVE LAZAR:

Now we can call a spade a spade. Profit is part of being a farmer, whether you're growing cannabis or tomatoes.

SHERAZ SADIQ:

Maybe so, but it's still illegal at the federal level to grow or sell cannabis.

PATRICK MURPHY:

Every cannabis cultivator lives with the fear of having their children taken away from them, having financial ruin.

SHERAZ SADIQ:

But in late August, 2,300 people, most of them existing growers, came forward to register under Humboldt's new program. But, according to the local sheriff, only a fraction of the county's pot ends up legally in the hands of patients.

SHERIFF MICHAEL DOWNEY, Humboldt County, California:

I would say 95 percent of the marijuana growing in Humboldt County, and possibly higher, is actually going to the black market.

What we have here is typically evidence that has been found in a marijuana grow that's been seized by the Humboldt County Sheriff's Office.

These right here are processed marijuana in one-pound bags. And we have the typical firearms that are seized in a marijuana grow, AK-47 assault weapons, M-14 rifles. This is what they use to protect their marijuana.

SHERAZ SADIQ:

The county is now trying to keep cannabis out of the black market with a new track-and-trace program that gives each farmer a set of stamps bearing codes that are unique to them.

In this demo, a bag of processed cannabis is sealed with a stamp and verified online as it moves through the supply chain.

MAN:

OK, now we can also check the proof of origin with the mobile application.

SHERAZ SADIQ:

For the first time, a patient at a California dispensary will be able to quickly check that a product was grown in Humboldt and be able to see its lab results.

From farmers to dispensary owners, 15 people are taking part in this pilot program. But now that California has voted yes on the recreational use of pot, legalization could spell tough times ahead for farmers here in Humboldt County.

WILLIAM HONSAL:

I believe that it will be grown all over the West Coast. And I believe the price per pound is going to become so low that the industry is going to be driven out of Humboldt County

PATRICK MURPHY:

The fear is that the people that were a part of this, that started this movement will not have a place in the future. And it will only happen if we do not take part, if we do not stand up and make our voices heard as the heart and soul of the cannabis industry.

SHERAZ SADIQ:

For the "PBS NewsHour," I'm Sheraz Sadiq in Humboldt County, California.